Sen. John McCain Letter to William Kennard.
Re: Phone Company Disclosure of Universal Service Charges.
Date: June 2, 1998.
Source:  Office of Sen. John McCain.  This document was created by scanning a fax copy of the original, and converting it into an HTML document.  The letterhead graphics, pagination, and signature were lost in the conversion process.

June 2, 1998

Honorable William E. Kennard
Chairman
Federal Communications Commission
1919 M Street, N.W.
Washington, D.C. 20554

Dear Chairman Kennard:

I write today concerning published reports that long-distance telephone companies are continuing to be pressured into trying to conceal from consumers the added costs of funding subsidy programs established by the Commission, These programs include the existing subsidization of rural and high-cost areas, as well as the entirely new grant program created by the Commission under cover of the Telecommunications Act of 7996 to wire all classrooms and libraries for Internet services.

This is not the first time I have written you on this subject. I would invite your attention to my previous letter dated December 19, 1997, also signed by House Commerce Committee Chairman Bliley, raising the issue of whether undue pressure was then being exerted to keep long-distance carriers from passing the added costs of these subsidies along to consumers. Chairman Bliley continues active oversight into these very serious questions.

The prospect that carriers are now being urged to bundle the costs attributed to these subsidies into line items already appearing on consumer bills suggests that I may not have made my views on this issue sufficiently clear. I write today to restate my views on the rights of consumers and the responsibilities of the Commission.

Consumers have an absolute right to know how much their bills are going up and why their bills are going up, And they have a right to that information being presented to them accurately, concisely, and understandably.

I want to be plain about the Commission's responsibilities. The Commission has the responsibility of implementing the provisions of the Telecommunications Act of 1996 concerning telecommunications industry subsidy programs. in exercising this responsibility the Commission has seen fit to devise a schools and libraries subsidy [begin page 2] program that many Members of Congress believe far exceeds what the Act calls for. In doing this - and particularly in providing funding for internal classroom connections the Commission created a subsidy so large that it cannot be funded without levying added charges on long-distance carriers and, ultimately, on consumers.

In retrospect, the Commission may not have made a wise choice. Since available statistics show that about eighty percent of all schools are already wired for Internet service, the Commission could have devised a much more modest subsidy program, aimed first at bringing Internet services to those schools that do not have them, and then perhaps providing some additional funding to supplement many other ongoing public and private programs to provide classroom connectivity. Doing that would have produced a more reasonably-sized, affordable program. Or the Commission might have prescribed access charges down to a lower level, which could have reduced, or at least stabilized, consumers' long-distance bills.

But, for whatever reason, the Commission did neither of these things. It has made different choices and, like all choices, these choices have consequences- In this case, the consequences are higher costs to long-distance companies that are being passed on to consumers.

In light of the choices it has made, the Commission's further responsibilities are clear. It can eliminate these added costs by reducing the size of the subsidy program it has created or by allowing substantial access charge reductions that can be flowed through to consumers. If, however, the Commission chooses not to act in this manner, it must then refrain from interfering with a carrier's prerogative to truthfully identify any consumer bill increases as a Commission-imposed tax required to subsidize identified programs, The Commission must not try to resurrect and tacitly exert what amounts to long-distance rate regulation that it has previously found, after lengthy public rulemaking proceedings, to disserve the public interest. And above all, the Commission must not be complicit in either hiding information from consumers or in misleading them about the components of their telephone bills.

The Commission must not compound its previous mistakes with consumer deception. Any effort of this sort would be in serious derogation of the Commission's statutory responsibility to vindicate the public interest. it would also be absolutely at odds with the Clinton Administration's new directive to federal agencies to use "plain English' in the interests of ordinary citizens. As the President stated, "By using plain language, we send a clear message about what the government is doing, what it requires and what services it offers." I would respectfully suggest that that is precisely what is at issue in this context as well.

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This letter is not written to advance the interests of any party to any proceeding before the Commission. Please treat this letter in conformance with all applicable Commission rules.

Sincerely,

JOHN McCAIN
Chairman